tv Squawk Box CNBC February 12, 2010 6:00am-9:00am EST
good morning, everybody. we've got some breaking news. a surprise announcement from china's central bank sending shock waves through the global markets today were higher. the senate finally rolling out a jobs bill, but not without a new round of controversy. and signs of life in the credit market. "squawk box" begins right now.
good morning, welcome back, everybody. i'm becky quick. i am joined by steve liesman and andrew ross sorkin of the "new york times." we've got a lot to talk about now. some big breaking news that just came out within the last hour. china's central bank surprising the global markets announcing that it is raising reserve requirements by 50 basis points. it's effective february 25th, but this is the second time we've seen an increase like this just in the last month. the markets are moving on this news. so if you are just waking up, pay attention. you've got the dollar and european and u.s. bonds jumping broadly. stocks and u.s. equity futures are falling at this hour. pay attention, folks. this is pretty important news because a lot of people wrote this off as a scenario after we got some inflation data out of
china yesterday that was tamer than expected. this was not going to be the situation. right now, the yen's 89.91. the euro ask at 1.3563. the pound is at 1.5617. there is action happening on this. people are trying to figure out exactly what to make of this move. china's central bank obviously at this point trying to tamp down inflation from all the money that flooded into the markets last week. take a look at the equity futures at this hour. you're going to see right now that the u.s. futures for the dow, down by about 63 points below fair value. so look out below on this news. this comes as a surprise. >> i think it comes, becky -- >> these are all moments that have happened on the back of this news. as we mentioned, it happened just in the last hour. take a look at the 10-year now. check out where the yield is standing again on the 10-year note. you'll see now a yield of 3.689%. >> it's a rally. >> we are seeing movement. commodities under pressure.
dollar is stronger, so you're going to see this across the board. oil is down by 1.42%. that's almost 1.9%. $73.86. and gold prices right now, it's having the same impact on gold prices, as well. down 1376%. that's just at 1.25%. $1,081.10 an ounce. >> i have to think that there's a little overreaction here. china's economy is not that big as opposed to -- u.s. monetary policy is transcendent in the world. just explain what happened here. what they said is instead of keeping 16% of your deposits on reserve at the bank so that you can't use it, so you can't get it out to the economy, they're now saying keep 16.5%. >> first i think it was at 14%. >> the farm banks are out. they're exempt. my whole point is that china does not liquify the world. >> although demand from china
has been driving commodity prices and -- >> so commodity prices should fall. >> i think there is a view, by the way, that china does liquify the world. >> i'm sure it doesn't. i'm sure it's the u.s. dollar that liquifies the world. and by the way, chinese banks do not liquify the world, for sure. we can agree on that. now, what i can't understand here is why china tightening changes the outlook for u.s. stocks in terms of earnings. i'm sure a portion of what we earn is over there. what china is trying to do is trying to tamp down a real estate bubble. >> and you say overreact, this is not a huge reaction. >> i just saw all markets around the world reacted to this.
>> i think it came as such a surprise, too. after yesterday's -- >> it wasn't a surprise. >> i saw notes yesterday that this was not going to happen today because the inflation data we saw from china yesterday was tamer. as a result, people were figure b, they were probably positioning betts on that belief that this would not happen today. so you have to up wind that. >> i think this is the second time in a month they've done something like this. >> it was. and when they did it the last time around, it did cause concerns through the markets. you saw the same sort of reactions. >> i guess you could theorize what the markets are concerned about is overtightening on the part of central banks around the world and that this would be a sign of that. stand by what i'm saying here. china in and of itself is not enough to cause a change in the dollar. >> but what about australia, too? >> and if it cause tess fed to be tougher than you otherwise thought, by the way, this helps the fed out a little bit. >> it didn't prompt the fed to do anything, actually.
well, maybe together with bernanke's exit speech, you put that together and people say, wait a second, maybe the tight is turning. and being on top of the timing of when the fed starts to tighten or when the rhetoric changes, because when the rhetoric changes, that's when rates will change. and if there weren't enough international news, the european central bank plans to join forces of the european commission to monitor the situation in greece. ecb president jean-claude trichet says the two will draw up necessary measures to maintain stability in the euro zone. european officials offered support for debt-laden greece at a summit yesterday. we don't know what's in the plan. it's some sort of support. >> i don't know what the plan is. except everybody is happy they're in a plan. >> they're in something. they've expressed support. >> monday, the finance ministers meet again. this may be a situation where you see more of the details that start to emerge. what's it call, the european --
the meeting on monday. >> what worries me is that the plan itself will be so underwell manying that people will say, is this going to work? >> mohamed el-erian from pimco is one of the belief that you're going to have to see some outside money from outside the european union that comes into this. remember, mohammed was at the imf for years. that might be where he's coming from. >> and our friend, john lipski from the imf has reported that they're ready to come in and support money as needed. the imf is ready to come in and the eu is like, we can do this. we don't need your help. >> if you ask germany and france, that's what they're saying. if you ask the uk and other nations, they've been saying -- >> let's bring the imf. >> we're changing the name for the program to "squawk box" "worldwide exchange." we've got new data showing the
economy stalled last kwaeker. germany's fourth quarter gdp was flat. exports were stronger. germany expects the country's economy to grow by 1.4% this year, becky. >> some banks borrowing less money from the fed. this is a sign that credit problems are easing and financial conditions are improving. the central bank's balance sheet expanding to $2.2 trillion. that is more than double the level from before the financial crisis when it hit. >> democratic senators are talking about a jobs recovery bill. senator harry reed announcing aed 16 billion based on tax breaks and construction funds. >> we feel that the american people need a message. the message that they need is that we're doing something about jobs. we don't have a jobs bill, we have a jobs agenda. and we're going to move forward on that jobs agenda. >> reid's decision to reduce the
scope of the bill is in agreement with chuck grassley. becky, i thought the number was going to be in the $80 billion. i was shocked just to read that it's only $15 billion right mow. they're gelth it from both side in terms of judd greg. he tlis there's a much bigger price tag than they're letting on, so he has some problem with this and thinks that the construction jobs are not jobs that will be well spent to be bringing money in. you would think that by scaling back the scope, maybe they could get everybody on board and get in on the agreement. but they're getting caught on both sides. >> meanwhile, andrew missed all the fun with senator cochran. >> and it's big news this morning. >> absolutely. every single paper, the post, the journal, and the "new york times" wasn't going to leave that one out, andrew. >> thank you. >> they all picked up our story from yesterday where corker came on our air and said i am going
to cross party lines. i'm going to work with dodd. this bill is too important to be part of the norm. we need regular la to remembertory reform. >> he caught us by surprise, too. >> and i was able to do some reporting, actually. >> you said it as though -- as if it was a surprise. >> it's what i do almost every day. i called up a certain senator and found out how they did it. it was interesting. what they did is they took the hardest issue, the thorniest issue, the issue of consumer protection and decided to put it at the end. so get everybody else done, you get a 90% of the bill agreed to and then you take that one bit, which it's huge, but it's really only 10% of the bill. -- >> will there be consumer price action? >> yes. >> but if corker goes over -- but corker was almost giving the
idea that he would sign off on an agency that did not have a lot of power. >> let me just give you a little more of the detail here. they have agreed, between dodd and shelby, to do a separate regulator, a super regulator. inside this agency would be two divisions, or at least two divisions. one is safety and the other is consumer protection. the thing they got hung up about is how much power should the consumer protection agency have or the division have to write its own rules? can it write rules regardless of safety and soundness or does it have to do it with safety and soundness? they got hung up on a rd would. >> that's interesting. >> so what a certain senator told me yesterday, it's a question about do you want to get to yes or do you want to get to no? >> and is it worth your time to get to yes and make a compromise? >> so they're looking at this too big to fail problem. they feel like they've made a lot of progress.
then we had warner on. he had we're moving along here. so that can happen. derivative regulation can happen. you get a 90% bill and then you get to ultimately, let's solve this consumer protection. let's come to some compromise here. and the idea was that shelby, the criticism he wanted to get to no. corker says he wants to get to yes. >> this is something we're going to continue to follow today. we'll be speak, judd greg a little bit, as well. right now, we want to get to overseas markets because of this breaking news. anna edwards is in london, but we want to start thing off with christine tan in singapore. she was covering the surprise announcement with the chinese central bank. >> the big story here in asia came after the markets closed. china hiked the reserve ratio requirements by 50 basis points. the timing was very much a surprise, very few people were expecting china to tighten policy so soon, especially after that surprising low inflation reading for january we saw
yesterday. the greenback falling sharply. oil and gold falling, as well. unfortunately, or should i say fortunate, china market won't get a chance to react to that announcement on monday because the china markets will be closed for one week due to the lunar holiday. hong kong also won't get a chance to react to the china tightening as the market will be closed on monday, as well. today, volume was light in hong kong with the hang seng finishing pretty much flat. a lot of markets here in asia will be closed on monday for the lunar new year holiday. but what i can tell el you is that japan, india and australia are open on monday and they will be the ones getting to react to that news from china. on that note, let me send it back to you, let me say anna in
europe. >> thank you, christine. in terms of the announcement from the chinese, that's been affecting our markets over the last hour or so. we were quite happily in positive value in the early part of the trading day. you can see the big drop that we saw as a result of that announcement from the chinese. we seemed to be a flaw, though, underneath that fall. just to go back to the point you were talking about earlier, about whether this is overdone, perhaps it is, but we have a lot of mining stocks listed on the market. you mentioned the european growth numbers. all i can tesay is thank goodne for france. the powerhouse, germany, is sitting in the back room at the moment. germany, flat. no growth on the quarter. france giving a 0.6% growth and that went a long way of giving the total european union 1% growth in the last quarter. greece, distinctively getting worse, but that country is back into recession or rather their recession has deepened, that
country losing 0.8% in terms of their gdp. we had thyssenkrupp in the basic resources space, the steel manufacturer, their numbers were better than expected and that stock is doing well today. michelin, on the tire story, that number was worse than expected. with that, i'll hand it back to you. >> all right. an anna, thank you very much. let's get more analysis in terms of the markets. we're going to turn to our task force. joining us this morning from argus partners, peter canillo. also, peter, thank you for joining us. to the news that china is raising its reserve rates on banks, what do you think this means for today and beyond today? >> i don't actually think it means a whole lot. i think obviously china wants to prevent a housing bubble.
and they're taking small steps to prevent it. and so i think this is, in their mind, an easy way of trying to cool things off a little bit. >> and in your mind, the appropriate way to go about doing that? >> well, i would rather see a policy adjustment. that would do the same thing. but that is not the way they want to do it. >> mike, does this have any implications for other central banks? does it mean if we start to see tightening there, tightening in australia, that we'll see it in other places? or is this a very regional issue right now? >> i think it's more regional. china is in a place with its economy that many other kins are not. so i don't think this is necessarily a sign of concerted global central bank tightening to come quite to the contrary. so it's just happening at a time we've had a confidence shock so markets are reacting negatively. but the point is for the chinese authorities to preserve the
expansion, they don't intend to derail the economy. so, you know, if this works in the way that they intend, then china's expansion should continue. so hopefully some of the market jitters here are temporary. >> what about, mike, the idea that we've been paying so much attention to greece, too? what's been happening with the official for a superan bailout on this, what i tell means for the euro and what it means for the dollar and beyond? >> well, you know, it's interesting. if you look at the credit markets in europe, it looks like we're past the eye of the storm, knock on wood, meaning if you look at those bond spreads on greek government debt relative to the benchmark german bunch, they ran up to about 400 basis points january 18th and now they've come in at almost 150 basis points. so, you know, we don't have a lot of details on the rescue package. but it doesn't look like greece is going to be allowed to defaulter or wither on the vine. although there will be some strings attached here and that means procyclical fiscal policy
for the greeks. that's not something that is going to be easy to squall low, but they don't really have a choice. >> peter, when you look around the globe and see all these changes taking place, which are the best markets? overseas, here? >> well, i like the u.s. right now. we're going to see further surprises in the economy, consumer spending is at an all-time high in the fourth quarter, believe it or not. inventory rebuilding has begun. there's fexed investment. and government spending, my god, we're going to have a $ .6 trillion deficit. and then, because of the policies of this administration, we're not going to get a lot of job growth. a temporary tax credit is not going to offset a huge rise in tax rates and uncertainty about health care. >> why do you like the united states stocks if you have those concerns about -- >> because the fact is, they're not going to raise interest
rates as long as we have a weak job market. >> but if you don't have jobs, you don't have consumer spending. isn't that a cyclical affect that will -- >> we have all-time highs in consumer spending. >> that might have looked good in the fourth quarter, but this is not a sustainable proposition? >> we did the same thing in the last two recoveries. it took two years to get jobs. >> but you weren't talking about 10% of the nation unemployed. >> no, that's true. but we're probably going to see positive job growth in the next few months. not very much, but that is not going to be enough to force the fed to raise interest rates. there is no exit strategy. they cannot sell 1.5 billion of mortgage backed security and fannie and freddie bonds. it's not going to happen the. >> mike, do you agree with that? >> well, i don't think the fed is going to be implementing an exit strategy any time soon. i'm more optimistic on job growth.
i think we have to have a little bit of patience here. virtually every leading labor market indicator is turning and turning in a convincing fashion. we have four months in a row of strong temporary hiring. that's a leading indicator for jobs. jobless claims are off the recession peak by about a third. believe it or not, that's one of the fastest declines out of a recession since the early 1980s. people working part-time for economic reasons. it's plunged in the past month, the last reading we got in january. hours worked are moving up, corporate profits are strong, the credit markets have turned. those things all lead job growth. this is a deep recession with a lot of job declines. i don't think the play book here is the jobless recoveries after the '01 and '91 recessions. i think spring or summer, we'll see 200 or 300,000 jobs added every month. i think that comes in the fall or winter at the earliest. there's still a lot of labor markets and the fed is very
focus on that. so you need a strong sustain ed labor recovery for them to exit. if i'm wrong, then they will never exit. >> the strong retail numbers, what are you surprising? >> i think this could surprise to the upside. it looked a little strange, so maybe a bit of an addback. we should be up at least 0.5%. it could be better than that. i think we're seeing a fairly broad based turn in the economy here. as income growth sxondz to an increase in hours worked and ultimately jobs, the spending rises should be sustainable. so i'm fairly optimistic on 2010. i think we should have about 4% real gdp growth. mike, peter, gentlemen, thank you very much. we appreciate it. coming up, the stories lighting up the squawk news wire this morning, plus, a penny for your thoughts. but first, as we head to break,
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>> the chinese need to transition to a spending economy. >> after dubai, what is the next credit crisis? >> the baltic. >> do we need a second bailout? >> absolutely not. >> i love it. try to get in there, dog. >> i am. >> who would be the next mitt romney? that's sad, walter, just sad. >> i love it. >> that was "30 rock" on nbc right now. it's supposed to be a conservative nbc anchor. >> and you don't think she was playing you? >> no. i am not a conserve -- well, i try sxo play down the middle of the road. >> who was alec baldwin playing? >> he's playing the head ge guy that he plays on the show. >> i know that. but who do you think -- oh, in real life? >> that's right. >> we're supposed to go back to the idea of casting all this stuff. >> i don't know. i don't want to get in trouble if i say anything. who do you think?
>> i don't know. i don't know. not steve, though. >> i tried to watch it last night. i fell asleep. but i have it on tivo and i will come back and watch. i'm a huge "30 rock" fan. and i'm a little embarrassed that they tried to -- what was that? >> i don't know. >> i'm a little embarrassed they tried to do -- >> tie voe. that's what it was. that's what we're going to do. we're going to watch it on tivo together. >> i did laugh, though, that they called that hot box. >> hot box. >> yeah. >> let's pivot and move on. >> yeah. this is a natural transition. >> the word pivot has become like a cultural -- if something is going on in obama where every he is pivoting. now people are using it the way you did, let's pivot. >> awkward moments for 100. the global markets this morning, the debt situation in greece and china's central bank
announcing it is raising reserve requirements by 50 basis points. joining us now is the currency analyst at chief markets in london, thanks for joining us, ashraf. >> hi, steve. >> how important is what china is doing not for china, but for the u.s., ashraf? >> well, it is very important for the global risk appetite. in the earlier interview, there was somebody that said this is going to be limited to the regional aspects. it is actually the chinese rate hike or closing the central banks like the reserve bank of australia to ease on basically hitting the brakes like we saw last time. and it's the aussies that are really growing quite fast are going to be hesitant from hitting hard on the brakes. and that would really prevent the u.s. and the fed from exiting this strategy. however -- >> ashraf, hang on, hang on, i
want to push back with you on that. >> go ahead. >> when the personal said regional, you described regional, or inside an industry. china hikes, the aussies ease off on their hiking because it's a commodity play. but ultimately for u.s. earnings, other than those in commodities, it seems like very little effect and the idea that australia would have some impact on the u.s. fed seems to me a little bit of a fed, ashraf. >> okay. let's take it back again, steve. if the chinese are going to basically continue to tighten policy, then an economy which is growing quite fast, as australia is, even though are going to be hesitant from hitting on the brakes. then what would the impact be on an economy that is not growing as fast as australia? if australia, which is growing fast, is going to consider about not raising interest rates further, that means the economies that are growing less strong than australia may
actually have to think twice about tightening. this is the argument that i'm thinking. but as i was going to say, steve, as this does not stop, members of the fomc, like the head of the currency of the fed, mr. hoenig, from basically continuing to decent from this very dovish outlook from the fed. that is why, when the minutes of the fomc minutes will come out, all the currency traders, all the bond traders are going to be looking at details as to the extent of the discussions that they can disagree with the low interest rates. >> ashraf, i want to get your thoughts on this idea. greece causes the eu to tighten less than they otherwise would. does that make the u.s. relatively what, easier or tighter in this world if you're a global investor? >> tighter. because that will stop the ecb from normalizing interest rates
and with the fed talking about hawkishness, that is pushing the yield differential over the germans to the highest level in 2 1/2 years and that's what's going to expect to drive down further. >> so follow that through, ashraf. higher u.s. interest rates should support the dollar you think going forward? >> absolutely. but without the u.s. not having to raise interest rates. it's basically the futures and the expectation owes of that. so the u.s. doesn't have to raise interest rates. >> ashraf laidi, thank you very much for that. we have to leave it right there. >> okay. >> we're going to talk more about this in just a few moments. we'll have more on the morning's top stories. we have black rock's bob doll telling us what he's buying and what he's selling.
by the way, this is the second time that the china has made a move like this just over the last month. the markets are moving on this news. the dollar and european and u.s. bonds have jumped broadly. stocks and in particular the u.s. equity futures, they've been falling this morning. we've seen a little bit of reaction on this already this morning. as you can see right now, those dow futures down by about 66 points below fair value. joining us right now with reaction is bob doll. he's chief equity vat gist for black rock. bob, news like this, what does it mean to a trader like you? >> well, i think, becky, you've got to keep in mind where china is starting. they're trying to lower their growth rate from a double digit real growth to high single digit. it's very different from most of the rest of the world. now, the fear obviously is is this the beginning as it was when they did it the first time a month or so ago, a world global tightening, a slow economic recovery? and while they're trying to slow their growth, i don't think it necessarily means the rest of the world is going to end its
recovery. >> you don't think it means the rest of the world is going to end its recovery. what does that mean you start doing with your portfolio right now? are there any changes you make based on this? >> let's say what we did in january with the sell-off, and if we get another one like it, i think you lean into some of the global cyclicals. some of the metals, some of the energy companies, even some of the retailers. they're the ones that got hit hardest when this all began. and if you, like us, are believers that the global cyclical recovery is real, you add to those names. >> you do add to those names. like what names? >> in metals, freeport. i think if you can guy that name under 70, you're doing well. in the retail space, a target or a coach in energy, some of the integrated companies, conaco, marath marathon, and if they get hit, some of the big tech names like microsoft and ibm we still think have legs higher. >> so what has changed in your opinion over the last month or
so, bob, as we got into this new year. has there been anything that made you think, okay, this is the beginning of a shift and something i want to start changing on my strategy? >> well, i think we have to be aware that this is likely the year when we move from -- it's all about the pe moving higher to the earnings have to come through because the pes will have some head winds, i.e. in the form of central bankers beginning their exit strategy. as a result, you have to focus on the companies that can deliver the earnings and deliver the revenues. and the fourth quarter, the earnings delivery and the revenue delivery has been very, very good. in the en, that will win out, in our view. >> we talked to mike darda earlier and he saidite he's not looking for the u.s. to raise rates until into the fourth quarter. is it too soon to be making a move like that? >> i don't think so. as you know, there are other parts of the exit strategy.
i agree it won't be until toward the end of the year, the announcing of mortgage security purchases. all of these things are a part of a very broad and slow exit policy. we will still have easy money, but it won't be everything associated with an emergency that we had a year or so ago. >> bob, that's what i was going to sort of debate with you about here. this idea that we are anywhere close to creating a headwind for earnings seems to me a little bit premature in the following way. if you think about just say earnings is a pole in the middle of the lake, okay? the lake, the water of the level is so high above that pole that it is just so far from being anywhere above water right now. if the fed were to reduce its balance sheet in half from 2 trillion to 1 trillion, you still are something like 200 billion higher. so it just think it seems to me like head winds to earnings from tighter policy are somewhere like two years down the road.
>> i agree with that. it's not a headwinds to earnings growth. it's pes. pes will end the year slightly lower than where they started, but earnings will make up for than the. >> why is it a head winds to pe? >> pes always peak more in a bull market? the pes that we enjoyed, we're not going to nationalize the banking system, we're not going to have a -- and that's when pes tend to peak from their earnings and growth tapes. >> hold on. the metric this morning is whether or not andrew's mother understand this. >> i think my mother does understand this. but on this issue, that pes are going to go -- yes, she understands that piece of it. i have one question, though, for bob, which is that you're seeing the reaction to china this morning. steve got an e-mail and i got an e-mail just like you did, actually, two minutes ago from another trader who said, overreaction and by the way, a lot of this is program trading. >> that's what that trader told
me. >> that's what a trader just sent me an e-mail, as well. is this really an overreaction, bob? >> well, look, i think we have to go back again a month. there was a lot more iraqi just the little pit from we've seen here. fundamentally, it's not going to alter the course of u.s. economic recovery. but i think the concern the market has is all about this headwind that gets formed as central bankers begin to reserve course. and i think there will be prosecute mature nervousness. but if you look at history, this is the part of the switch in the market from, if you call it, the pe -- >> but is this the inflexion point? when most people think the inflexion point isn't come for 12, 14, 18 z months in reality? >> well, there are many inflexion points along the way. my guess is now we have to focus on earnings and they're coming through well. >> bob, the chinese do not
liquify reform, right? >> indeed. >> do they liquify the money markets inspect. >> indirectly they do. china is a big incremental user of commodities. the answer has to be yes. >> we should explain to people this program trading. there are people designed to look at those headlines and trigger a sell or a buy depending on what markets is based on that headline, right? >> well, yeah, i'm sure it's plain old investors, as well, saying oh, my goodness, china is at it again. i'm going to be more cautious. and they're seeing people make those trades and then the xeert is on top of that. >> it's procyclical on the downward trading, if you will. and then people pile in. >> bob, thank you very much. it's always great talking to you. >> is there any other single stom stock that we should be talking to that is maybe new on your horizon?
>> ge, is that a name you know anything about? >> well, i wasn't trying to pull any names out of you. are you playing with me or are you really looking at ge? >> look, we're doing a lot of work on ge. we're not convinced yet. but if you want a combination of industrial company and a financial company, you have to take a look. >> you have to take a look, but you're not convinced just yet? >> not yet. stay tuned. >> bob, it's always great talking to you. we always like getting individual stocks. we will see you again really soon. >> bye. >> how are we disclosing that now, becky, the parent company, soon mott to be -- >> the parent company of nbc universal. >> it's not going to be, if anything goes -- >> well, that's true. >> a soon to be 49% owner. >> so here is the real question. when comcast is the majority owner, what will you say on the air? >> we'll say comcast, jointly -- >> you still have to disclose a 49% ownership stake. >> will you say the minority owner of this network?
i don't know. >> what we're going to say about g when it's not the owner their network, we're not going to talk about right now. coming up, why some think the united states could become the next greece. i was just in town for a few days, and i was wondering if i could say hi to the doctor. is he in? he's in copenhagen. oh, well, that's nice. but you can still see him! you just said he was in... copenhagen. come on! that's pretty far. doc, look who's in town. ellen! copenhagen? cool, right? vacation. but still seeing patients. oh. [ whispering ] workaholic. i heard that. she said it. i... [ female announcer ] the new office. see it. live it. share it. on the human network. cisco.
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>> he just came from an overnight party. >> life is celebration. >> we've been talking a lot about greece, trying to figure out what this means around the world. but if something like this would happen in the united states, too, what's the betting from outside the united states? could that happen? >> well, you have to realize, the dollar was getting distinctive. then macroeconomic fundamentals defied the logic and dollar was weakening. this crisis is an opportunity for the united states. it's a $13 trillion economy. that's not underestimated. you have very strong fundamentals. i have diversified revenue streams, you have democracy, the strongest democracy. constitutionwise, it's -- what we're seeing as a subprime, i posted it in times square. don't drive them to defeat a slow nation. conceptually, we can never underestimate the united states. it's a convergence of the financial economy getting into
the real economy. >> this guy is more optimistic about america than a lot of americans. >> true. >> that's pretty amazing. >> you have to convert. the global governance fails. it affected real economies, even the emerging economies and that's the reality. the world has to change and they have to come to terms with global governance. we have to qualify the process. we have to come to terms in terms of the -- we have to come in terms in terms of hedge points. >> do you think that's realistic? >> i do. >> it's very hard in this country to get states to agree on anything. global governance, i'm all for it, but i wonder about the realizism of it. >> global governance is not an option. >> can i question you on that a little bit? >> yes. >> it strikes to me that we have
global governance, basul. every bank came to the same conclusion. there was no bubble. we had the unity, but we had the unity around the wrong policies. >> it was designed to defeat the human man. we have to achieve a global goods. come together, converge politics and economics. continents have to come together. it's not an integrated policy of monetary policy. you have to necessarily come out of the petty politics and look at the bigger picture. it's a human crisis. >> you said something very interesting. this was to defeat the common man. i mean, that's an interesting statement when you think about wall street versus main street, that this was built to defeat the common man. you believe that? >> absolutely. consciously, the identities failed.
accounting models have failed. value ages have failed. what rewe talking about? who can fix this inspect the global has to come to terms. >> yeah, but hold on. what i want to know is in whose hands should i put my welfare? you're telling me to put my hands right back into the hands of those guys whose models failed, earnings failed, everything failed, their regulation failed. it streams me that we have to do more rethinking than what you're suggesting. >> absolutely. consumerism has changed. capitalism has defined its form and substance. it's not isolated from the global crisis. there is the leadership required from the united nations and you have to necessarily include the large at one piece and start sitting. you know the substandard. you know the framework to see we pull this crisis. politicians have sent multiple messages to massage the sentiments. it is not record. it is stimulus.
it is stimulus and quantitative easing. that doesn't mean the patient is out of the icu with that administrative period. the minute you pull out the quantitative easing, you're going to have a serious problem in the world. so let's take the world is not going to -- for the next two to three years. it is nos a pessimismic approach. we have to analyze in hard core >> we would love to continue this conversation. we would love to have you back next time you're in town. >> boy, that was interesting. >> that was. >> i've got to tell you. coming up, "squawk" wraps up the week in style. stories grabbing our attention coming up next. and let the games begin. the winter olympics opening tonight. we'll head to vancouver and look at the athletes you need to know a bit later on "squawk box." what are you doing...? calling chase sapphire, seeing if we have enough points to stay longer. now? you don't have enough time...
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elderly. again, this was "30 rock" on nbc last night. we found out apparently they're going to be showing a spoof of cnbc over the next several weeks. this was a cnbc show with a conservative anchor they call "hot box." >> you've got to love it. >> i've been watching the show for years and every time they're in jack denahy is on in the background. >> is it real cnbc or "hot box"? >> i don't know. it looks reich the real cnbc. >> notice behind you, i don't know if they can get that "hot box" up. >> other episodes interns mock us up and say, don't send me to pa r paramus. >> there are two schools of thought. when you become the butt of sarcasm -- this is your moment. >> or you've ingrained so much into the culture -- >> you think this is it? >> it was a spoof on blazing saddles -- >> this is the top of the market? >> blazele saddles was the top
>> bunk? >> bundt. bundt. >> why a ballooning budget deficit may be enough to derail the feds' plans for a quick chit from the bailout. presidents day. ♪ washington and lincoln honored this weekend, but today -- we get your portfolio in shape for the long weekend. gold, oil, currencies in a special trading block you can't afford to miss. let the games begin. ♪ the 2010 winter olympics kicking off tonight in vancouver. what to watch and which olympians will be making headlines as the second hour of "squawk box" begins right now. ♪ this is all about the benjamins ♪ ♪
all about the benjamins. >> good morning, everybody. welcome back to "squawk box" here on cnbc. i'm becky quick along with steve liesman, joe and carl are off today, but we have a lot of ground to cover in this hour, including the latest on what's been happening with greece and what it means here in the united states. could what happened in greece happen here as well? we'll talk about that issue this morning. plus, the opening ceremony of the 2010 winter olympics is tonight. we are live in vancouver with a preview of what you can expect over the next two weeks. wait until you see some of these pictures. also, a long weekend ahead. that does not mean your investments should wait. the "squawk box" trading block gets your investments set for that long weekend. in the studio, our guest host today, the realist, nouriel roubini, professor at nyu's stern school of business. we did a poll on cnbc.com to find out what your nickname should be. overwhelming they picked roubini the realist. and did not go -- >> dr. realist. >> you like dr. realist instead
of dr. doom? >> it's short and easy. >> that's what they wrote in on the poll. we think we'll reopen the poll and get people to vote. so if you want to vote on these things, go to cnbc.com. we have a lot to talk about with nouriel. in the meantime, let's get a look at the morning's top headlines with steve. >> central banks surprising the global markets by announcing raising bank reserve requirements by 50 basis point. comes ahead of the week-long holiday if china for lunar new year. it's the second such increase this year. the markets around the world moving on the news the dollar and european and u.s. bonds jumping broadly. stocks, you can see here, where are stocks? coming up, i guess. here come the stocks. yeah, they were around flat at 5:00 a.m. had this news came out. you can see they're sharplily negative here, minus 62 on the dow. toyota's chief planning a trip next month but would not confirm whether he was attend a
congressional hearing. congress man darrell issa is pressing his case to get akio toyoda to testify in a congressional committee saying he would issue a subpoena to force his congressional appearan appearance. ecb president jean-claude trichet saying the two would maintain stability in the euro zone. they offered support for greece yesterday but we don't know watt specific steps are yet. becky? >> let's get back to our guest host this morning, nouriel roubini, the chairman of rgemonetary.com and professor at stern school of business. this news about what's happening in china, this has markets sitting up and paying attention. what do you think is at work here? >> well, after they slowed down the growth in china during the financial crisis, the massive monetary and fiscal easing, stimulus of 25% of gdp, now the economy's overheating and
another one of these cycles in china. the question right now is whether the chinese will be able to have a soft landing rather than hard landing of their economy. two episodes, one was 2004 where they had a soft landing. another case was 2007, they tightened and by the time they tightened, there was a hard landing of the economy. i worry this time around is going to be like the latter case rather than the former one. >> one of the questions this morning, given what's happening in the markets globally, is actually, does this represent an inflexion point for other countries? we're talking about australia in terms of their own monetary policy. >> it is in a sense that many of the economies are rapidly recovering among advanced economies, say australia, norway, israel, emerging markets, china and india. growth is accelerating. you should tighten. if you tighten too early, your currency will aappreciate. if it's going to appreciate you'll lose competitiveness. wh
everybody is wary of tightening too soon. that means the overheating will continue, the bubble will continue and they'll have to tighten more down the line. maybe in the second half of the yore. my worry about china is they're not doing enough early on. they'll have to do more in the second half and there will be a slow down in u.s. and japan and there will be a double dip. >> then we call him dr. doom again. >> dr. realist. it's not a question of being optimist or pessimist -- >> nouriel, there are people who would take huge issue with that. they would say you're going to be looking at this as the glass half empty or even a quarter empty on this, who say this is not reality. who say things look much better out there. what do you say back to them? >> take fourth quarter gdp, three-fourths was in inventory. consumption is growing at 2%. if you think about in the first half of this year we'll have growth close to 3%. you have the fiscal stimulus. it becomes a drag on the second
half of the year. inventory adjustment is going to be fizzling out by q2. sense of hiring half a million workers. you have base effects. effects of the policy stimulus. the first-time home buyer tax credit will be phased out. i expect growth in the first half of the yore will be positive but the second half all of these temporary factors will be gone and go back to sluching growth. they are to delav raeverage, la capacity, credit crunch -- >> we talked to mike huckman -- >> where are we going to get the growth? >> just to throw out -- >> why can't companies spend? why can't they spend on capital spending? they're sitting on $3 million of cash. >> the realization is that 70%, lowest in every recession, why is capacity not utilized? there's another question, they have the cash flow -- >> no demand? demand doesn't come back.
>> no. >> we did 95%. we can't get back there anyhow, any way? >> you have to rebuild savings. fixed income is tapped out. government consumption cannot go on forever. it's become a drag on growth. now the dollar is not going to weaken that much. where is the growth coming? >> and i'm not calling this real growth but the extent new stimulus money will come to the market, you think that will do nothing? >> instead of a fiscal drag on the second half of the year, we'll have a new drag on the economic growth. we're not going to have a stimulus large enough to lead to a positive effect on the economic growth coming. the risk is that if you do too much, eventually like in greece, people will say runaway fiscal deficit, we'll monday ties them, and you'll have a crowding out of the recovery. that's a big risk. >> what about the -- >> you can't do that forever. >> what about the positive signs you see? yesterday, let's look at the jobless claims number.
was better than expected number. showing there could be signs of improving job market which means the consumer gets -- >> average unemployment rate is going to be something like 10%. this year we'll create 90,000 jobs -- >> they said below 9%. >> no, eventually -- they say they're going to grow 95,000 jobs per month an average. you need about 125,000 to stabilize unemployment rate. so, yes, maybe it's going to fall from 9.7% to 9.4%. big deal. huge unemployment rate. some are suggesting on-- most js are gone forever. firms say, we cut jobs. the costs are there. economy will be sluggish. labor market is going to be sluggish. not just job losses. also loss of hours, average wages. income is falling. >> hold on. hours were up in the last -- >> yeah, for the first time. you know -- >> you've got to start somewhere, nouriel.
hold on. you also had, contrary to what you said, we had a rise in equipment and software spending. under your theory, given the 70% capacity utilization there should be no spending on new -- >> of course, there is an investment drag because of a credit crunch -- >> now they're coming back. >> there is a little bit of a recovery but 70% of capacity not utilized, most strategists suggest there's not maximum capacity. >> assumg you are correct, what do you do about it then? we make you king for the day. you can do whatever you want. what would you do? >> cans of tuna. >> no. i think the government is what we do, low growth for the next few years in u.s., europe and japan. overlef leveraged, not enough savings. we have to spend less and save more. we can try to stimulate the margin in the economy with easing monetary fiscal policy and backstopping the banks but the reality is the fundamental factors are whenever you have a balance sheet recession, due to
leverage in credit excessive, growth recovery is weak. 800 years of economic and financial history that suggests that economic growth is going to be slow. i don't think we can do too much about it. if we try to do too much, then like in greece we'll have an unstable fiscal deficit, runaway fiscal policy. we have to trench. >> wow, what a way to start the weekend. >> how does the united states compare to the rest of the globe? problems here versus problems in other places. this is not greece at this point. >> no, it's not greece. the u.s. dollar is still at reserve currency, but eventually if you keep on running budget deficits over the next decade, then public debt is going to double from 40 to 80, 100%. eventually, even in united states, i don't think this year, the bond market vigilantes will wake up and say, gridlock in
congress, then the republicans are going to veto tax increases, veto spending cuts and then the of reese resistance is keep running printing presses and eventually you have a fiscal problem. you have a fiscal train wreck and overinflation if you monday ties it. we'll see if there's policy change, not as much gridlock in washington, maybe things will be different. so far, doesn't look very good. >> i imagine futures are going to be down after that even more. >> keel. this conversation. nouriel will be with us for the rest of the program. lots more to come, too. >> if you have any comment, which i imagine you might, or questions which you might as well, anything you see here on "squawk box" e-mail us at firstname.lastname@example.org. the imf joining forces with the european union to safe greece from ballooning budget deficit. could the u.s. be the next country to experience a similar situation? we debate that.
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the answer, woodrow wilson. for a while. >> oh, for that election before we entered world war i. world banksers voicing concerns over whether debt like greece could hit other countries. say it ain't so, or maybe he will say it is so, david malpass, nouriel roubini and andrew ross sorkin. david, you know, what's the chance that we have some sort of, i guess what do you call it, a balking at the idea of buying u.s. debt and that really the market just renege on that? >> i think we have a lot of problems, but the debt markets are pretty deep, so i don't agree with the view that we're at the point where markets will balk at the u.s. people will try to push back against washington to try to
stop the spending. that's basically what's going on in greece. we treat it as a country but it's really the government of greece that spent a whole bunch of money. germany is standing up now saying, we don't want to just blindly write a blank check for you. you, the government of greece, has to stop spending so much money. i think that's constructive debate going on. >> david, how would we know when it was going to happen? my understanding of the history of these things is you basically wake up one morning and the bond market has had enough. there's not a lot of warning ahead of time. >> i think there will be a rolling debt crisis. we've seen the start of it with iceland, dubai, with greece, i think california will have some severe problems of cash flow. so i think it will simply take time to get up to the ultimate debt of the u.s. government. remember what we're doing is running a near-zero interest rate, which helps the u.s. government at the expense of savers across the country. people are getting practically no interest on their savings
accounts so the government gets a cheap interest rate. i think that can keep things going for a while longer here. >> david, what's the difference between the u.s. and euro zone? euro zone you have member states with massive fiscal problems. in united states you have california with problems, other states that are bankrupt, eventually a federal bailout and we'll have to monday ties it and that will be bearish for the dollar in the same way the problem of greece is now bearish for the euro. isn't that symmetry? >> i agree there are similarities. gold was going up yesterday on the idea that europe was just going to write a blank check into greece. i think that is probably not the way it's going to work. they're going to fight about the spending at the government level. so, the similarities are that we both have made these huge entitlement promises that are basically unfunded. in the u.s. it's medicare, social security and so on. europe has made its own promises. i think they're actually further down the line to debt crisis than we are.
but we're getting there very fast right now. >> yeah, i mean, we have the entitlement problem but now a fiscal crisis at the level of state and local governments, right? the fiscal hole is huge by any standard. >> that's right. and the debate is going to be similar to what's going on in greece, meaning -- and it's kind of interesting. you've got the european union trying to stop the greek government. one government fighting with another government to try to reduce spending. the same, i think, will go on here where the federal government in the u.s. will have to decide how much to bail out california. and the issue is to make the government stop spending as much money as they are. and that creates a lot of social tensions. it's unfortunate all the way around but a little inevitable right now. >> sin the real difference between greece and the united states that united states has a principling press, greece doesn't? >> there's one difference, but -- >> it's a major difference if your concern is default, right? united states may devalue the
currency but in terms of default, and that's essentially why european union has to come to greece'said, because at some point it's no longer good for greece to be part of a union where it can't have any control over monetary policy. >> you have a very valid point that if they can run a printing press, you can monday ties -- but inflation is another cap on that. it's like default. >> but -- >> in the case of a country like greece, if you cannot monday ties it, then default is a risk, unless the central bank, in the game of chicken between greece and the ecb, decides to blink and decides to monday ties it. that's what they might be doing. >> david -- >> to me, the similarity is between greece and, say, california or new york, where the state budgets are as out of control as greece's budget. and so the fight, and the interesting -- the challenging issue is whether one government, the imf and the european union can stand up to the other government and help them find a
better spending policy. and if they can, then i think that can end up being a constructive outcome of this. but we -- >> but if they don't -- >> by the way, you know, greece -- >> if they don't, david, doesn't greece end up leaving the eu? if the measures end up being so severe they have to clamp down on their own society, then you say, you know what, i'm going to go out, issue a greek currency and i'm going to fund myself that way. >> they will have to devalue and default. >> hold on -- >> but hold on. you're making a comparison to california and new york. i don't think that somehow california and new york are leaving the union because the united states has decided -- >> well, you know, california has decided to create ious. so it's the beginning of a quasi currency. that happens when you don't have the money to pay your bills. california started doing that. >> i want to go back to the question -- >> by the way, california is much bigger than greece.
greece is only 3% of the huge gdp and it's considered to be too big to fail. california is one-seventh of united states. >> i want to go back to the question steve asked. the conversation on greece only happens -- you know, happened overnight virtually. the question, we're now talking about this conversation about the u.s. relatively they're reticily, hopefully. what is going to be the trigger point where this becomes a meaningful conversation? >> well, in my view, rates are going to remain low for a number of reasons. low growth, deflation, bout of uncertainty on risk conversion, fed with zero interest rates, with the fed doing qe, the rest of the world accumulating reserves and now domestic financing because savings have gone up. at some point after the election, i think that might be trigger point, if there is divided government, gridlock, people will realize run away fiscal deficit, then that could be the trigger for actually enterprising of the bond market. >> david, weights your turning point? >> i think the trigger point are
at the state and local level where there will be fights over individual bond issues. so, in new york it's a cash flow problem at the short end. in california they've assumed the federal government is going to give them $8 billion just to tide over the budget. and so at some point, there's -- they're going to have to fight it out one by one on the individual bond issues, the municipalities, some municipality will be not -- will not allowed to fail. others will be too big to fail. and i think that fight is in front of us in 2010. >> by the way, last time i was a realist and talked about the recession, 1991, muni bonds were trading like junk bonds because local governments could not pay. >> the rtc was in many ways a state bailout. specific state came in. it did a lot of business in florida and california. >> can i make one positive point here -- >> please. >> -- in an otherwise gloomy discussion? every day people go to work
wanting to make a little more than the previous day and do a little better job. and countries are doing that, bringing people into the labor force. and so there is a basic secular uptrend in humanity, in the globe. and so if that can be allowed to work, in the end there's enough money to go around, it's just that governments are spending it all right now. so it's not -- it's not as inevitable a crisis as people make it out to be. >> david, you have been very concern about the dollar. here we have the dollar strengthening. have you been wrong about that? >> no, no. i like the dollar strengthening now. i've wanted that. it's too bad that it's -- >> you wanted that but you forecasted it would be weaken. >> no, that's not right. i kept saying the weakness of the dollar is hurting u.s. living standards. but what's happening right now is that china is tightening some and that makes people stop and think, are the central banks really going to flood the whole world with extra bank loans? the u.s. is not doing that.
we still have the regulators clamping down on banks and on small businesses. and so i don't see the signs that there's this hyperinflation. the dollar and euro make sense right now. >> david, thanks for joining us this morning. >> thank you. >> thank you to nouriel for his contributions, i think. >> you think? come on. >> he'll be here all morning. >> yes, we have more to talk about. >> thank you definitely to david. i'm not sure about thank you to nouriel. >> it's going to be a long commercial break. here we go. coming up, finishing touches taking place in vancouver before tonight's opening ceremonies. darren rovell is there for the next two weeks. darren, you made it. is the excitement building there? >> reporter: the excitement's building. look, ma, no jacket. i can confirm, it's pretty warm here in vancouver. we'll talk about what athletes will be heating up. that's coming up next on "squawk box."
little pressure ever since china made a surprise move to raise the reserve requirements on its banks. as you can see right now, the markets are right now -- the dow futures down by 56 point below fair value. again, china making this move to require its banks to hold more in reserves, raise that level by another 50 basis points. it's the second time in a month china's made a move like that. there are concerns it will take some liquidity out of the markets. that's why we've seen futures under pressure. you've seen the dollar strengthening. you've seen commodities coming down, especially gold and oil. breaking news coming just ahead. the commerce department releasing january retail sales, that comes an hour from now. those retail sales are expected to rise. also due out today, business inventories for december. both reports were originally scheduled for release yesterday but because of the delays we've seen in washington, that city basically being shut down for four days, all that snow has put an impact on this. we will get those numbers today. also, a federal judge weighing an s.e.c. $150 million
settlement with bank of america, has demanded more details on why bank shareholders were left in the dark about problems at merrill lynch. a u.s. district judge in manhattan has ordered the bank and regulator to reveal whether anyone urged disclosure of merrill's mounting losses between september of 2008 and december 5th of this year. >> this is an unbelievable story. in part because, when is the last time a judge, a, has stepped in between a settlement, and more importantly, i think the point he's making about why he's so upset about this is, who is paying this $150 million settlement? not the executives but the shareholders. that, i think, is so central to his issue. >> what i think is more important is this idea that cuomo now has a suit, right? if this other thing went away, it kind of reduced the importance of the sil suit from cuomo and barofsky from the inspector general. >> that's your take. >> it almost read like, i to go back and read it, he want them to litigate the cuomo case, which is all about the disclosures and the timing of
it, with you knew what and what you disclosed it before he agrees. the original settlement was $33 million. we have to figure out who this guy is. now it's $150 -- >> he's a very interesting guy. he's worked on a number of interesting cases. he's really in this case step into a greech which most judges have not. >> $33 to $150 million is not enough for him. >> i think it was the principle of where the money is coming from. >> not only that but what they knew and where they knew it. >> and by the way, if this case ever gets to trial, i don't know if it ever will, on cuomo's side or this side, the most interesting part is the lawyers for the first time are going to be brought in. they've always claimed privilege but the executives are blaming the lawyers for giving them advice. >> so now the lawyers are witnesses? >> yes. it's a very fraught and complicated situation. >> you don't want it to settle because you want the story?
>> this will be a great story. >> it will be an aig story after that. >> lots of good stories to keep us going. >> if cuomo, bit, becomes governor, i think this whole things disappears. >> did you read the cuomo suit? >> yes, i have read it. it's fascinating. >> they had $12 billion of known losses before the december 5th shareholder meeting, which is amazing. and they didn't disclose it. according to cuomo. lots more to talk about -- >> extend and pretend. >> in the meantime, let the games begin. the olympic ceremony at the olympics is going to be taking place indoors this year. this is the first time a host nation has ever put a roof over the extravagant spectacle. darren rovell is in vancouver with a preview of tone's ceremony and who to watch when things kick off this weekend. hey, darren. >> reporter: yeah, that opening ceremony taking place at 7:30 p.m. eastern time tonight. we'll have a preview of that. and a company that's cashing if on that a little later on in the
8:00 hour. first, let's talk about some of these athletes that you should know and we'll start with lindsey vonn. this was the story of the games. this girl, her drive for five, reining world champ in downhill and super-g. huge sponsors in red bull, under armor, sprint, cover of "si," dropped the bomb she badly bruised her right shin. has not been able to practice. will she be able to come through or not? that's one huge story we'll be following. how about davis, he skated away from the u.s. team, he does not get financial support in speed skating, the first african-american to win an olympics gold last time around and clashed with stooemeven col? why does that matter because he donated $3 million. and apolo ohno, speed skate, five mledals. he'll try to beat bonnie blair
with six. he'll have four events to try to surpass that. don't forget, he has the dancing with the stars championship in 2007 to kind of appeal to the other people out there who don't normally watch the games. then how about bode miller, he went 0 for 5 last time around despite being tremendously hyped up. skiing and drinking story by "60 minutes." he quit the ski team. he's back. now he plays the underdog roll. then you have the snowboarders. this is where the u.s. certainly has a whole bunch of strength. shaun white, gold medal in the half pipe, obviously sponsors galore. red bull actually built his own practice super half-pipe for him. the flying tomato has a big chan, live in prime time on nbc. some other snowboarders you should know, kelly clark, who won a gold if 2002, gretchen
bleiler, hannah teter, and lindsey jacobellis, who did a little hot dogging in the end and missed out. those are some athletes we'll watch. the opening ceremony taking place at 7:30 eastern time on nbc. we'll be back in the 8:00 hour to profile ralph lauren, they'll have their outfits on all the olympians tonight. back to you. >> thanks a lot. i was going to say, stay cold. >> well, there's no -- there's no snow, right? that's the problem. >> when you come back at 8:00 i want to talk about the outrage in "the wall street journal." >> darren, is there really no snow? that's a real problem? we keep hearing they may have to postpone events or put them if different places? >> it's especially a problem with the half-pipe with the amount of snow they need to bring in. they're trucking this stuff in. i'm telling you right now.
i do have a couple heat lamps so i am kind of cheating, but i do not need a jacket without any heating assistance here. >> what is it, 40 degrees? >> reporter: i'd say it's about 40 degrees right now, kra. it's obviously very early in the morning. >> that's crazy. darren, we're going to see you in just a few minutes. i want to talk to him when he comes back, too, because i want to find out why you thought i would know apolo ohno. he just assumed. but "dancing with the stars" he figured i would know. >> i want to talk to him why canada, according to the wall street journal, is going to win more gold than the united states. coming up, your trading block as you get ready for a long weekend.
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welcome back to "squawk box." let's get to our trading block where we're tracking the dollar, oil and gold. boris, peter beutel and jim steel with the gold. boris, two variables in the equation, china tightening and greece looks like it's loosening up in terms of the panic there. how does that go into your model and what does it spit out in items of the value of the dollar? >> it still says risk is under assault from all angles. going to the u.s. recession we
have to see retail sales, u of michigan could force risks further down. 135 in the euro, key level. a lot of very good action there because tremendous amount of stops and barriers there. we'll watch that carefully. >> if we break through 135, where's the next stop? >> well, it opens up 132 #.50 and possibly all the way down to 130. but i do think the euro is very, very oversold. i think they're going to try to probe it. if they can't do it, may be a bit of a bounce in the next couple of days. but the interesting thing in the currency market right now is where is the risk trade? i think the risk trade is only left if the australian dollar because that's the only place in the world, asia-pacific, where growth continues to surprise to the upside. if you're a believer in growth, a bull on growth, aussie is your best bet going forward. >> weaker dollar is not good for oil. how do you think this settles out? >> recently, we haven't been following the dollar as closely
as we've been following equities. this week we've been higher every day during this week, but without any momentum. and, of course, our doe report was delayed two days, same reason everybody else, washington under snow. the demand numbers are anemic. they are not getting any stronger. we've got plenty of inventory, distillate, especially. we're looking at ending january stocks the highest since 1983. february looks like it's going to end at the highest since '81. lots of supply. not great demand. we determined what the price is based on the dollar, other days based on equities. we've got all these problems going on with iran. that's the huge wild card that could be very bullish. we also have the seasonal starting in two weeks. that usually takes prices higher from early march into middle may. so, a lot of factors here on the
energy play. >> i want to ask you on one of your chart, i think it was earlier this week, it showed imports of crude oil essentially crashing. what was going on? i hadn't seen that before until i read your report. what's going on? is that demand in united states? part of a worldwide glut? are they producing it? is it on tankers now? >> a lot is on tankers, but imports have dropped from a normal level of about 10 million or 10.5 million barrels a day down to about 8 million barrels a day. we've seen a huge collapse in imports -- >> that's amazing. >> and it's because we're refining less. the refinery utilization numbers look like something -- looks like we've just had a hurricane. because these numbers that we're seeing now, the only times we've ever seen numbers like this, except in the late '70s, is after a hurricane. so, the entire complex right now looks like we've just been it's by a storm. >> thanks for being patient, jim. a couple good days in gold from
a big drop and now down again. jim, what's the outlook here? >> well, i think the longer term outlook is still certainly positive. gold has been hostage to the sovereign risk issue in greece. and i think -- and has tended to move in tandem with the way those developments have panned out. but also i think the monetary tightening, the latest round in china, has been negative as well. if you look at gold's activity this year, every time we've had monetary tightening or comments from the bank of china or from commercial banks reducing loans, gold has tended to sell off with other commodities. i think that's the most -- the nearest term impact. now, longer term, i think sovereign risk in general, never mind if it's greece or any other country or even translated back through to the u.s., is a positive for gold. but as it plays through the currency markets, that's not necessarily the case on any, you know, one particular day. >> well, you know, when sovereign risk hit the united states, that might be positive for gold, but in the short run,
the increase in sovereign run in europe is unraveling of currency trade and that's led commodities and gold to rise. >> right, but -- >> you would be desperate enough to fly to safety in u.s. treasury. u.s. treasuries rather than gold? >> as it works in the near term, yes, it's praying out in the treasury market, precisely, and a reduction in the risk trade as it's impacted the euro. what was interesting yesterday was that there was some decoupling between the way the gold traded and the euro. but you're right, what we would want -- not what we would want, but if we would see sovereign risk rebound back on the u.s., that would be the most positive for gold. >> got to leave it there, jim. thanks very much. boris, peter and jim, thanks a lot. still to come this morning, why our guest host nouriel roubini sees a flat to down market in 2010. and later, we speak to senate budget committee ranking member judd gregg about keeping america great through financial reform. stick around.
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black stone founder writing an op-ed in "the washington post." he warnings congress's rush to punish the banks hurt the global banks. >> it's an interesting op-ed. a lot of people are reading it this morning. it was posted last night. in that part of the argument he's making, it was the argument he was making in davos, by putting all this pressure, the pop list anger, as he might call, it directed at the banks, that that unto itself, not necessarily just the economy, is creating uncertainty. and that uncertainty within the banks is preventing them from lending. i don't know if that argument -- >> right, but i guess the argument is banks are afraid? >> excuse me? >> the banks are afraid to loan more or -- >> the argument he's making is that with all this uncertainty around regulation, what's going to happen? is the volleyer rule going to happen? do they have to sell off businesses? what are the capital requirements really going to be? all of these issues are creating
so much uncertainty that if you're running jpmorgan, for example, you're saying, you know what, let's hoard cash. i don't know if it's a fair argument or not. i've heard it from the bankers before, but clearly he's making the case. >> i think regulatory uncertainty, of course, adds to the credit crunch. he has a valid point. but i would also argue the banks brought auto themselves, back to business as usual, obscene bonuses, risk leverage so that's why there's a public packlash. >> no question. one thing he's trying to do in the op-ed, it's really directed at lawmakers more than anybody else, is this idea there's so much blame to go around. he talks about the regulators being to blame, us, the people buying homes we couldn't afford to blame, so he's trying in his own way to create a different public discourse on -- >> first of all, i'm weeping for the bankers. >> i know you're not. i'm not necessarily taking a position. i'm just saying -- >> i'm sorry there's uncertainty, andrew. what do they want?
they want government guarantee on the deposits and then a government guarantee on profits and a government guarantee on loans. >> listen, i didn't write the op-ed. i'm just saying -- >> that's why you get paid the money you get paid because you take on risks. that's one. second, i agree with you in that corker said yesterday one of the reasons he has crossed party lines to work with dodd is he believes the uncertainty over regulatory reform is crimping lending potentially. and i will grant that, that the idea that perhaps that you don't know what the form is going to be, who your supervisor is, get it done. unfortunately, this is a reality of the idea that you have -- who put it to you this way? the entire financial system right now is in receivership to the political system. that's what nouriel correctly says s what they brought upon themselves. >> yes. we had to socialize private losses between recapitalization, liquidity guarantees and insurance, the pony to the financial system, and now there's a huge amount of backlash and --
>> we have a full screen? could i read from this? this will get you -- get your blood boiling. he writes -- when he says that, he's saying it's the populist anger -- >> it doesn't mean we. >> your bank is contributing to our own economic losses. that's what he's saying. i'm not saying it. >> my view of the world, andrew, is you can be loved, you can be rich or you can be famous, but you can't be all three. pick two. these guys want to be -- >> i like -- >> they like rich. >> two out of three, that's probably true. >> you can be loved and famous, famous and rich, but you can't be all three. schwarzman wants all three. i'm sorry, i can't be angry at the banks because that's going
to hurt the banks. do you find that to be a compelling argument? >> no. >> but you read it. >> i read it. i read it and i think a lot of people are reading it this morning. what i do think -- there's something that rings true to it, which is that all of the focus has been on the banks being bad actors as opposed to what is the right regulatory reform -- >> that's what the senate -- >> right, but he's not -- i would say he's not saying there should be no regulatory reform. he says there should be some form, but he's saying it's creating so much uncertainty. i know you des disagree. >> last word, nouriel. >> we'll have to tax banks, regulatory reform sooner rather than later because i worry about another asset bubble. people are back to business as usual. the only way investment bankses are making money is prop trading, which is dangerous so we have to crack down on it. >> lots more to come on "squawk box," including pimco ceo mohamed el erian. we'll find out what you thinks
about the situation in greece and why he says fixing sovereign balance sheets will take years. that's coming your way in a bit. stick around. right now 1.2 million people are on sprint mobile broadband. 31 are streaming a sales conference from the road. 154 are tracking shipments on a train. 33 are iming on a ferry. and 1300 are secretly checking email on vacation.
heard from china, going and raising those reserve rates by 50 basis point. that has put pressure on equities around the globe. but this morning, take a look at what's happening with ingersoll rand, a separate story as the company came in with earnings of 48 cents. the street was looking for 53 cents. came in with revenue just under expectations, $3.31 billion versus the 3.3 billion the street was talking about. guiding the first quarter earnings, including five cents a share of restructuring. reuters consensus was 37 cents. you can see why there's concern heading into these numbers. right now ingersoll-rand, the bid is at 30.5 # 1, ask at 32.76. when we return, we've got a big report buried by the blizzard. belated breaking news at 8:30 eastern time. retail sales. also, is financial reform the key to keeping america great? senator judd gregg will tell us if he's willing to cross party
keeping america great with financial reform. >> i am stepping forward as a republican senator saying that this is a piece of legislation that needs to be passed. >> that was tennessee senator bob cork on "squawk box" yesterday talking about reaching across the aisle to get a deal on the table. >> i think every american wants to know that we're going to create a resolution regime that says that when an entity fails, it fails. >> we'll find out if fellow republican senator judd gregg shares the same bipartisan feelings. after dubai weights the next credit crisis? >> women's tennis. >> do we need a second bailout. >> absolutely not. and can what happened to greece happen in the united states? >> did i do something wrong? >> where is it? >> whoa, whoa. how did you get up there? "squawk" icon and rebel, pimco ceo mohammed el erian breaks down the situation now in these markets. >> would you prefer i look like this?
>> stick him with the jagger thing. "squawk box" begins right now. ♪ welcome back to "squawk box" here on cnbc. first in business worldwide. good morning again, everybody. i'm becky quick along with steve liesman. joe and carl are off this week. helping us out this morning as he has been for most of this week, andrew ross sorkin of "the new york times." today our guest host, nouriel roubini, chairman of rgemonitor.com and professor at nyu's school of business. let's get a quick look at markets. futures have been under a little pressure after some surprise news from china. as you can see, those futures down by 66 points below fair value. things turned around for the markets. they had been looking up until we heard from china. china getting business done before celebrating the week-long lunar holiday.
the they announced it is raising banks' reserve requirements by 50 basis points. this is the second raise they've done in the last month. again, that has put pressure on equities markets around the globe. the european central bank plans to join forces with the european commission to monitor the situation in greece. ecb president jean-claude trichet says the two will draw up measures to maintain stability in the euro zone. european leaders offered support for greece but they have yet to announce specific steps. that's the question the marks have been following. democratic senators unveiling a much talked about jobs bill. senate majority leader harry reid announcing a more modest than first expected $15 billion measure focused on tax breaks and construction funds. >> we feel that the american people need a message. the message they need is we're doing something about jobs. we have -- we don't have a jobs bill. we have a jobs agenda.
and wie're going to move forwar on that jobs agenda. >> his decision to reduce the scope is drawing fire from chuck grassley, who had attached his name to a bill yesterday. yesterday the house passed their own $155 billion jobs bill back in december. this is drawing sides from all different positions and all over the spectrum on this. we'll have more right now. >> on "squawk box" yesterday senator bob corker broke the news that senator dodd along with himself have agreed to work on a financial reform package deal but that doesn't mean he's trying to replace banking committee member richard shelby. >> i'm just one senator and i certainly would never say that i could replace senator shelby, somebody i respect and like a lot. but i am stepping forward as a republican senator saying that this is a piece of legislation that needs to be passed. >> here now with his outlook on financial regulation reform,
senator judd gregg, member of the banking committee. morning, senator. >> hi, steve, how are you? becky? >> i'm great. tell us what you think about what senator corker is doing. >> well, i think bob is one of our best, smartest, most capable senators, especially on issues like financial regulation. he wants to get something done. i can appreciate that. the issue, of course, for our side of the aisle is this consumer protection agency that the president wants to set up. and i think if richard shelby and chris dodd had been able to reach agreement on that, and i believed they had reached agreement on that and the white house hadn't sort of pulled back the democratic membership on that issue, we could all go forward in a bipartisan way. because i think chris dodd wants a bipartisan bill. i know he's asked me to work with jack reed. we made very strong progress, jack and i, on the issue of derivatives. so there's a lot of common ground here. this really isn't a partisan issue. this is extremely complex exercise and getting governance right. and the only really big
philosophical difference here is on the issue of how you protect consumers and our resistance as members of the republican party to this consumer protection agency being a free-stanning autonomous agency. we see it as creating a lot of problems because it could easily be populated by people who don't believe in the markets, don't believe in -- >> i'm sorry, senator -- >> don't believe in social justice. >> miening was that senators dodd and shelby had already agreed to make it into a single agency inside of which -- and the question was -- >> no. >> -- huch rule making authority they had. senator dodd told me that directly. >> the difference of opinion was, was still that the consumer protection agency would have been auto mouse within an agency. maybe in the treasury -- >> we're saying the same thing. >> it wouldn't have actually been within the treasury, it would have been a free-standing like the ftc or fcc. >> i want to ask you if you support the process that dodd and corker have agreed to, which
is take this thorny issue and put it at the end of the discussion so it doesn't stop further progress? >> probably not. >> you don't support that? zooz a practical matter f you can't solve consumer protection, you're going to put those of us who want to reach a bipartisan agreement -- we're still working, jack reed and i, on the derivativetives issue and we hope to have a comprehensive bipartisan exercise there. but the whole package, if you -- let's say you settle the whole package with the xepg of consumer protection, where that's going to put people like myself is we're going to vote for the whole package on banking reform and then get hit with a consumer protection bill. and that's going to be politically an untenable position. our ability to get the consumer protection right means that it nearly needs to be merged into the entire process of negotiating the regulatory reform. i don't think you can separate the two. >> senator, andrew sorkin here. do you think you're going to reach some agreement on the consumer protection issue? also, how politically unpalatable is it for the republicans to say that they're
not in support of consumer protection? i know it's not in this form that's your issue but from a political standpoint it doesn't play necessarily to the public. >> you know, andrew, that's the problem, isn't it? this is really about politics, not about the substance of getting it right. you as a reporter are going to say, republicans are against consumer protection because we're against a free-standing agency. but you set up a free-stanning agency and you'll find that the availability of credit for a lot of americans will be dried up, will be chilled dramatically because our concern, my concern, is that that agency will not be responsive to safety and soundness. that it will be separated from the people who are responsible for making sure that the banking system -- >> senator, you are willing to not have resolution authority, you're willing to not have regulation over derivativetives because you can't agree on this issue. in the wake of -- >> no, that's not -- that's not not what i said. >> but you're willing to say, since we can't do consumer, let's not do resolution authority. that's what you're saying, no?
>> you didn't listen to me. i understand why joe gets so upset with you now. >> oh. >> because you don't appear to listen when people are saying things. what i'm -- >> i asked you a direct question, for. >> no, what you asked me is did i accept this as the best procedure. no, i don't. i think the best procedure is what we were doing, which is trying to reach an agreement on everything rather than just chopping it into parts because i think if you chop it into parts, you end up with -- >> but you can't -- >> wait a second. everybody stop. i want everybody to stop. i can't hear everybody talking over everybody else. finish your point, for. thank you. >> if you can't get agreement -- >> let the senator finish his point. senator, go ahead. >> my point is, you know, these negotiations are going forward. richard shelby is sincerely trying to move this process forward. he wants a bipartisan product. chris dodd wants a bipartisan product. in the end i think will will have a major comprehensive bipartisan project. obviously, bob corker feels he wants to negotiate it one way. shelby wants to negotiate it
another way. i'm negotiating with jack reed another way. my guess is that at the end of the day, the senate will have a fairly substantive basically bipartisan product. but how we get there is not absolutely clear. i'm not suggesting, however, that i want positive to pursue the corker course. i'm suggesting that i want to pursue a course where everybody, all the republicans are at the table negotiating with the democrats. >> senator, this is nouriel roubini. what do you think of the voluntarily ker rule? do you think it will be passed? what's your view? >> i'd be interested in your thoughts, professor, because obviously you're one of the leading experts in this area but we haven't seen specific language. we've seen the concept which is basically not allow proprietary trading with insured assets. that's a thumbnail description. but we haven't seen the language. and i guess you could describe it -- depending on the language, what they're going to limit and
define as proprietary interest because the issue. and so i'm looking forward to seeing specific language from treasury. i sense treasury is having trouble developing the language, even though the concept is pretty clear. they're having trouble developing the language. i'd be interested if your thoughts because it's a huge issue for us and has thrown a whole new factor into this whole negotiation. >> senator, ip to understand precisely what you're saying. i want to really get this. are you saying that if you cannot come to agreement on consumer protection, that the senate should or should not go ahead ado resolution authority? >> i'm saying that consumer protection is critical to getting a comprehensive bill. and that i hope we'll get agreement on consumer protection and taking it off the table and not negotiating on it as you're pursuing the issue of the rest of the package is a mistake. >> and, senator, therefore, do we expect that consumer protection, and some people believe that we will get some form of consumer protection, but it will be watered down in order to get this bill passed?
what's your expectation? >> andrew, i don't accept the word watered down. that would be a "new york times'" description waf we're interested in. what we're interesting in -- >> tough morning, senator. tough morning. okay. >> we're interested in a market or approach that encourages people to be able to get credit and understand the credit they're getting and you don't have to have a separate agency in that area. our concern is you set up a separate agency, you end up populating it with academics and people who believe in social justice, not in proper capitalism and the markets and you'll end up with less transparency and probably significantly less availability of credit because the banking system is going to be confused as to what it's supposed to do relative to consumer protection. where as if you merge the two, consumer protection and safety and soundness, you make them at the same level of importance for the regulators, then you'll get a much better product, i believe. and it's going to benefit the consumer a lot more. >> let's talk about something i think many people agree on, including you, which is the need for resolution authority but there's a lot of debate about how to make that work. how do you want it to work?
>> i think that bob corker and mark warner basically have a very strong plan. basically what they're going to do is suggest -- first, there won't be any conservation. if you're in trouble, if you're at serious risk and you represent a risk to the marketplace and to the system, you're basically going to be resolved. you're not going to survive. shareholders will be wiped out, bondholders will be wiped out. it will be done through some sort of adjusted bankruptcy proceeding, most likely. and there will be no survival situation here where these companies are kept alive. too big to fail cannot survive any longer. we have to have a system where there is no moral hazard there, where the government isn't seen as being on the line for large institutions which have failed. >> senator, i want to ask you about the jobs bill. we just spoke about that. we just talked about this greatly scaled down bill that's being passed for $15 billion. it's being criticized by some in your party for being too scaled down but you're attacking it
from the other angle. you think it's -- >> absolutely. it's a misstatement to say it's $15 billion. it scores at $80 billion on the highway side. unpaid for. that's $80 billion of additional debt being put into our system. we don't need that. a $15 billion bill or an $80 billion is going to have very little impact on employment in this country. what is it going to do is send a political message, and that's what this is all about. the cost of that political message is, as i say, $80 billion of new debt. we can't afford that. you want to do something constructive -- >> should washington sit back and do nothing about jobs? >> absolutely not. i'll tell you what washington should do to get this economy going, it should make it clear it's going to step up and take on the issue of spending too much money, running up too much debt, and passing it on to our kids, a country they can't afford. if we put in place serious efforts to try to get our long-term fiscal house in order i think we would see a significant reaction in the marketplace that the government is going to have the capacity to finance itself through the -- for the foreseeable future.
right now, nobody knows weights going to happen five years from now relative to our debt because we're running up so much debt that we're not going to be able to afford to pay for it. so let's -- let's look at what really is -- are the underlying problems of this economy, which is a government that's living well beyond it's mean and cannot possibly pay for the cost of the debt it's putting on the books. >> senator gregg, thanks for joining us today. >> alleges a pleasure, steve. >> really? >> yes, of course. >> really? >> of course. it's fun. i appreciate it. thank you. >> okay. becky? >> coming up, washington getting back to work just in time for a three-day weekend. we'll check out the agenda with "meet the press" moderator david gregory. would you like a pony ?
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countdown is on to the start of the winter olympics. we're 11 hours away. ralph lauren will have its logo all over these olympic games. darren rovell is live in vancouver with the story and the logo. >> reporter: that's right, steve. all over, ralph lauren will have that logo, the famous pony team usa. they have deals with wimbledon, with the u.s. open but ralph laurens th says this deal is th
best. >> we find people are interested in buying ralph lauren products wherever they are in the world. they understand the quality. they understand the sensibility. they recognize the horse associating that with usa and the flag has always been something that help to move our products. >> reporter: it won't be hard to spot that logo either. the dimensions of the logo have increased in recent years. >> when we first created the big pony it was done for the u.s. open. we weren't really sure how the public would respond to it. we thought it would either be the big pony or the big mistake. it's been a tremendous success. >> reporter: the olympic exposure's been good for the company. during the beijing games the company's stock rose significantly. by the way, those uniforms are inspired from the lake placid games in 1932. it's interesting, you're going to have to pay a pretty penny for that big pony. some of the clothing, the opening ceremony's knit sweater
actually cost $425. guys, back to you. >> darren, thank you very much. we'll be checking in with you a lot over the next couple weeks. appreciate it. as we said, stay warm, even though it's 40 degrees there. we'll talk to you soon. >> reporter: okay. in a rare turn of events, bipartisanship may be the word of the week with senate democrats and republicans joining together on jobs and on brank reform bills. joining is david gregory, moderator of nbc's "meet the press." david, for a week that the capital was apparently shut down for three or four days, we've seen a lot of business that's been coming through. you had corker switching over on regulatory reform, the jobs bill being pared down. it looks like they got some stuff started in the works this week. >> now on the jobs bill you're getting accusations from republicans that democrats are walking back from some commitments they made in a larger jobs package that was getting some blow-back from within the democratic caucus. we'll see. at the moment you have
democratic leaders publicly daring republicans to oppose the new version of the jobs bill, which is part of a strategy that the white house has initiated, too, which is to try to work with republicans on getting a jobs bill, for example, but also keeping pressure on republicans. in effect saying, look, if they say no, they oppose these things, we're going to lay the blame at their feet. it can't be we have to accommodate them fully. so i think there are some potholes still on that road to bipartisanship. >> in fact, we just heard from senator judd gregg who said he's want not in fare of this pared down jobs bill. he think it's a much bigger price tag than the $15 brl. he says it scores as $80 billion. you have camps from both sides coming in. do you think this gets stuck as well? >> i think there's a lot of momentum to get it done. from the white house perspective, getting a jobs bill is huge, to try to reengage on health care. the president can't afford not to, not to come into a time when
jobs are the number one focus and have been for so long without the government doing something to address that and then getting back toy to a very expensive health care reform effort. look, i think they need achievement. they need to offer something to republicans so that republicans can have something to say they've gained as well if they're going to continue to do business. >> is that because their own polling shows the same thing that "the new york times" put on its front page today, "new york times"/cbs poll, while the president has an edge over republicans in a battle over but majority of respondents say he's yet to offer a clear plan for creating jobs. >> the federal government can only do so much in terms of job creation but it has to do what it can, politically and substantively. and if it can, you know, deal with tax structure and tax breaks the way they're talking about now, stimulus spending that obviously has some impact, but is difficult to nail down and gets paid out over a longer period of time, they've got to have all the levers works. the administration recognizes that.
a health care reform effort is not a direct way to deal with jobs. and the white house realizes that. the president knows it. so they have to get something done that they can also negotiate here. look, a jobs bill is a case, too, where they can apply a lot more pressure politically and white house advisers talk about this, on republicans, to dare them to oppose something like that and hold that over their head if that's the case. >> why would a republican want to collaborate on anything with democrats? after all, they're stalling on everything, won in virginia, massachusetts, they think they're going to win in november if they stall on everything else, there's gridlock, obama will be a one-term president. will will be any partisanship from cap and trade, health care, jobs to stimulus, to anything? >> i think that there has to be a pivot point at some point that republicans say they have to make that shift from opposing the strategy, froo descenting on
where the president is to offering a tangible alternative for voters if they're going to be restored to leadership. if that's going to happen in 2010, that's a downpayment on trying to make a serious run at the presidency in 2012. i agree with you, i think they're a big question mark in items of health care reform. why would republicans as a political matter cooperate when they seem to be on the winning end of the argument? most people oppose obama's version of health care reform. he doesn't have that leverage in the public right now. i don't think republicans fear political paireril if they don' cooperate on health rare reform. >> how about regulatory reform and this idea that core, says ice goes to work with dodd, which i think judd gregg just shot down. >> i think it's an important development because the white house is very serious about having this fight with the banks and with wall street generally over financial regulation. and whatever help they can get will be very, very important because they feel that's an important fight to have. but, you know, the difficulty here on the republican side of
the aisle is the fact that you've got a big pushback from wall street, as you well know, and the more uncertainty there is in items of the rules of the road going forward, the worse it is for the business cycle as well. all i can tell you, from the white house point of view, they want to press hard on this, they want this fight and they'll enlist where and who they can. >> david, what do you have coming up this week? >> we have the vice president, joe biden will join us from vancouver, from the site of the olympic games, to talk about jobs and health care, bipartisanship and national security. everything running on all fronts. >> david, andrew sorkin. do me a favor, ask him about obama's comment this week to "business week" that apparently he doesn't -- that he didn't begruj lloyd blankfein's big l salary payment. we saw the whout roll that back. i'm skurs.
>> so am i. i don't think there's a lot of confusion on where the president stands on these bonuses. i've heard him say before he doesn't begrudge people's success. i agree that populist tone rears its head at different times but i don't know if that's totally inconsistent with where he's been over time, do you? >> no, but i thought it was interesting there was that back and forth. >> david, we'll see it this weekend, watch it on sundays. related braenging news, retail sales coming up right after this.
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next up, we're finally going to be getting breaking news that got blown away by the blizzard earlier this week. we'll have the government retail sales report right after this. jacques icon and rebel, mohammed el erian of pick pimco will tell us if the u.s. is on the verge of a debt cries. e e e e e e e e
welcome back, everybody. we've been waiting for the government's retail sales report. kevin ferry has those numbers for us. he's standsing by. >> good morning, becky. up 0.5, the actual for retail sales. 0.6 less autos. maybe a little more than consensus, but definitely in the realm of where the buzz was on the trading floor this morning. a small revision, down 0.1, which is to the better side of last month's number. >> we've seen a lot of reaction this morning, kevin -- >> 0.2, sorry, kevin.
it was minus 0.3 before, now it's minus 0.1. go ahead, becky. >> let's talk about some market reaction. you're watching what's been happening down there all morning with this, with the china news earlier. what's the roller coaster ride been like this morning? >> well, definitely coming out of china, becky. the thing is that if you look at the loan numbers yesterday, what you saw was a normal instance where once they started to tighten, everybody that was on the cuff of lending really went to the banks in china and started to borrow before the rates went up. so they are fighting that surge right now. and that's been the harsh reaction. it certainly buys our fed time to sit pat and let's see if we can stabilize the currency market. that would be key to doing much better. >> run us through some of the numbers. i'm not sure we're looking at correct futures charts this morning. can you tell us what numbers you're seeing down there, kevin? where are the dow and s&p futures? >> for the market? >> yeah. >> well, i've got to turn around.
the interest rate market's virtual unchanged, and the s&p is about 1070, down seven points. >> let's get rid of these boards. all of the boards we're looking at right now are wrong. strip down the boards. what you're looking at at the top of the screen is correct. we'll listen to what kevin's numbers are. >> down seven points. so the reaction, very muted. i think it will center around how the currency markets stabilize up. people get their head. the one point i would say, what you've seen in the past four weeks is that people who thought they were currency experts at thanksgiving and christmas are now portraying themselves as sovereign debt experts. i would be very careful about who you listen to about what they understand about sovereign debt and how you should be moving your portfolio. >> kevin, stay right there. we'll bring in the rest of our panel. steve's going through the numbers. andrew ross soshgen is with us as is nouriel roubini.
steve, did you see anything else in the numbers? >> i'm interested in christmas. one thing you see here is miscellaneous store retailers, where they put together fuel dealers, along with the internet guys and they revised that from minus 1% to plus 0.4%. that's a pretty big revision. if it is the internet, i have to find the detail. that's one thing that's good. a lot of positives in january. the thing that sort of thing about january is the whole gift card thing. there's christmas in january as well as december. the 0.5%, you put that together with a better than we thought december, a 2% november and a 1.2% october, and the consumer was not dead over the last several months. despite what many people had said about what happened at christmas. >> no, but the -- >> don't point at dish. >> nouriel thought the number -- >> you know, there's -- there's dead and there's creeping along. you know, i think nouriel's point, and i've been listening all morning, we want him to be
wrong about as many things as possible, but one of the things people jump to is somebody says this is going to be weak, it's not going to be great and we say, oh, my god, the world is over. you're looking at a world where demographical demographically, financially, we're not going on see what we saw in the '90s. we're going to see something that's gradual. that doesn't mean it's dead. this is good news. the moderate employment numbers are cyclically good news. this is okay it just isn't spectacular. >> i agree. i never said the consumer is dead. in qst q3 and q4 consumer was 2%. these numbers are consistent corrected for inflation and other things for a growth rate of consumption 2% annualized. if it's 2% then the economy will grow at 2% or less. potential growth is 3%, so 2% growth is trouble for employment, for the situation of the economy. >> kevin, we're now looking at the correct boards here.
am i wrong to say that the futures did slip a little bit on this news? >> had a little that slipped a little bit. i wouldn't say it was the news that did it, but certainly it shows that people are focused on effects around the world rather than the news, which i would continue to say, that we are plodding along in the right direction. it's just that you can't get anybody to focus on it. >> just remember that dooish i'm looking at numbers before i walked in. you know, bank tightening is probably a quarter of the excess liquidity in the chinese banking system. so there's still a lot, a lot of loose liquidity. this is one step in tightening it. you know, it's more symbolic indication of what the government in its opaque way wants to do, deal with these inflation problems, deal with overheating, overleveraging. this is not going to stop chinese growth.
it's not going to stop chinese imports. it's not going to stop iron ore exports from brazil. we shouldn't exaggerate what this does. >> yeah, probably another point. i was in davos and i spoke with board member of one of the biggest retailer in the world and he said three things were important. he said we see retail sales that are flat. secondly, we're placing orders from china from december, we'll reduce them because there is no demand. three, used to be a case that people run out of money on the 28th of the month and then the 27th, 26th, 249, so people are running out of money to spend early in the month. that's the problem with the economy. no job creation, no income creation and consumption growth is an epidemic. >> we have 3% year on year nominal retail sales growth. if i deflate -- give me a deflator there. i am better than flat. >> real consumption growth was only 2%. so with 2% growth of 70% of the economy you cannot have more
than 2% growth, unless other components of are growing faster than gdp. that's not the case. >> is that your outlook, too? >> i think in this -- given the backlog or the derth of capital expenditures we've seen since the beginning -- since the turn of the century there's probably a little bit of pick up in capex to be seen. it's not huge. i heard you arguing about this this morning. 70% -- you know, that's all fine, but that assumes that all i want to do is restart that old steel mill. what about if i'm looking to upgrade my software, what about if i've got new inventory management system, logistics management system. there hey be new equipment, plant equipment or equipment in software you need that didn't -- that you're going to write off the old stuff. you don't know how much of that 30% unused is going to be written off. you literally don't know. i think it's a mistake to be overly pessimisttic about this
cyclical growth in what secularly is not a terribly attractive picture. >> some will be written off but at the bottom we're at 67%, now at 70%. recession bottoms out about 80%. >> no question this is -- >> we have to take a break. kevin, i want to ask you, the increase in the deposit percentage in china, 16% of deposits, does china liquefy the world? is this a china issue or a u.s. issue, what china's done this morning? >> it's a global issue. when you talk about that, you have to remember that the lag time's for their effects in monetary policy are much shorter than the lag times with our policy. so i think that you have to look at it together. you have to realize that the dollar is increasing, so implicitly their currency is moving with you. we've inherited some much their monetary policy, they've inherited ours. i would say you can -- you have two choices, grow a brain or get a labotomy but the economic
debate is swinging into the political debate. very little focus on the middle. we live in the middle. you have a lot of decent recovery, very strong foundations. if it returns to rational debate about what's going on around the world, we'll be successful coming out of this. >> that's really interesting. everybody's in -- nobody's in the middle. >> thank you for doing those numbers. when we return, is the u.s. on the verge of becoming the next greece? we'll put the question to pimco's mohammed el erian and we'll get his reaction to china's fireworks for the new year and how the exit strategy works with neighbors on the brink. one suggestion is to make your shipping more efficient with priority mail flat rate boxes from the postal service. shipping's a hassle! weighing every box... actually, with flat rate boxes you don't need to weigh anything under 70 pounds. if it fits, it ships for a low flat rate.
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welcome back to "squawk box," everybody. take a look at the futures. you'll see the dow futures still down by 57 points below fair value. this all started off morning when you got word from china, raising those reserve rates for their banks by 50 basis points. that put pressure on equity markets around the globe. so that continues with the retail sales numbers we just got. did not see a massive pop. again, pressure on the futures today. our next guest was among the first to sound the warning bell on greece. also one of our very own rebels and icons, we're talking about mohammed el erian, pimco's co-cio and cio there. you've been talking about greece for some time, warning people to watch out for this. our question is, what does this
mean back here in the united states? is this something that could happen here and how concerned should we be? >> beck yshg i think the most important thing is to realize that sovereign balance sheets are now in play. one of the consequences of the crisis has been that the public sector had to step in to offset deleveraging of the private sector. that has now put the public balance sheets in play. when you go from the general to the specific differentiation matters a great deal. so greece had all the worst elements, high debt, high def sit, limited policy flexibility and limited ability to absorb any adjustment. u.s. is not greece. the u.s. has some elements of greece. it has a high debt getting higher and higher and a high def sit but it is still a reserve currency. so the u.s. is not greece, but any investors has to say seriously the notion that sovereign balance sheets are now in play. >> when you take that seriously as an investor, what should you
be doing? >> you recognize the minute the sovereign is disrupted, that has ripple effects through risk markets. you become more humble not about what should happen and a lot of debate you've had this morning is about what should happen, it's likely to happen. what's likely to happen is muted growth, concern about public financing, a crowding out of the private sector and, therefore, we have to impose a risk premiere on account of these factors. this is something the markets is not used to because normally sovereign balance sheet are not in play. but after the crisis, sovereign balance sheets are in place. >> mohamed, this is nouriel. i agree with you there's going ton athemmic recovery, you talk about the new normal, i say u-shaped recovery. we have sovereign risks, japan is going to deflation, the u.s. look anemic, china might have to tighten more than they need and like during 2007-08 that tightening might heaton when we
slow down. what's the risk of a double dip as opposed to an aanemic recovery? improo we would put 60% probability that after you get the inventory and stimulus sugar high that you stabilize but at a very muted growth rate, which keeps, unfortunately, unemployment unacceptably high. there's a tail risk that if there's a policy mistake or market accident that you may end up back in a lower dip. the more likely scenario right now, 60% scenario, is the slower growth, this muted growth. and then the debt dynamics become a multi-year issue and then the exit from unconventional policies becomes more complicated. guys, this is a -- there's lots of known unknowns out there right now. the critical thing is to try to navigate what's likely to happen rather than what should happen. >> i've been puzzle all week over your call, which you
e-mailed into the becky quick news wire that exists, call on european bonds. i'm a little puzzled by that. >> it was german bunds. >> german bund. >> given the greece situation, that was the issue. >> steve, you know, a few months ago bill said it, i said it, we went long germany versus the u.s. it's worked out very well. that spread has moved by 36 basis points. it's now pretty stable. and the whole idea back then was that there wasn't enough appreciation that the u.s. would have massive issuance, on account of the extension of the average maturity of debt in order to lower the refinancing risks and that wasn't priced in. we put on the germany versus u.s. trade which has worked very well. >> it was a spread play, essentially. is it done now? did you have the move you were looking for? >> it's basically done. we're looking at other places like canada where we think there's attractiveness.
>> i was going to ask you on the germany side, because the conversation we were having on monday was around greece and what the implications would be for bailing out greece on the bond. >> step one, the bund benefits. why? within europe there's a flight to quality out of peripherals into the call. so benefit ee noe enormously. two depends on what germany does to help greece. there's a lot of question marks. it's not that easy to arrange a bailout for greece. there's moral hazards, enforcement issues and until they bring in the imf to play role of coordinator and overseer, this is going to be a multi-round process. this is not going to be solved either easily or immediately. >> is pimco short u.s. mortgages? >> we are underweight u.s. mortgages. you know, with the government announcing that it's exiting the program, the government has been a noncommercial buyer. you have to respect the impact of a noncommercial buyer. they take mortgages to very rich
levels, so we have been underweight mortgages. >> but, you really believe they can essentially phase out qe? in an election year, you have huge issue of mortgage debt, agency debt, treasuries, and at some point they'll stop in march. they might have to swallow their pride, lose their reputation and start buying this stuff again. that's the signal coming from japan, uk and other parts of the world, right? are we going to phase out qe? >> that's a possibility. mervin king yesterday made it clear they want to maintain that optionalty in the uk. we haven't heard that language yet in the u.s. it's a possibility. you clearly hear it in the uk. when mervin king says, for now but we'll keep our eyes open. >> are you of the opinion the greece problem will not be solved entirely from the eu? you think they need outside money? >> yes.
first they need to swallow their pride and bring in an outsider who can coordinate and oversee this -- twin things that need to happen. you need two things to happen. first, you need greece to get serious about its fiscal adjustment and sell to the population that it's a legitimate step. that the alternative is worse. we vane seen that yet. secondly, you need the eu to come in with timely financial assistance but reduce the moral hazard. fewer nouriel will tell you, we've seen this over and over in different countries, it's difficult to coordinate these two things. you normally need someone to come from the outside and to be the arbitrator, if you like, of this coordination process. i think the sooner they bring in the imf, the better it is for greece. >> i absolutely agree with you, but additional question, suppose they resolve their fiscal problem with the imf or otherwise, there is problem all these countries in europe have, the peripheral view is on italy,
spain, portugal, the competitiveness. they're losing market shares to china, current deficit is widening. even if you solve the fiscal problem, how would you solve the competitive problem? it will take a decade of structural reform that's very hard to implement. >> nouriel, that adds to the issue of why we cannot expect the global economy to bounce back in the v-like pattern it's priced in. the u.s. has had headwinds on a unemployment. europe has head-winds on account of limited policy flexibility and the emerging world cannot do all the heavy lifting on its own. i mean that speaks directly to the notion of a new normal where global growth, unfortunately, will be more muted than we've been used to. >> thank you very much. we are glad you are back from australia. >> thank you. >> thanks for joining us. we'll talk to you soon. when we return, one more crack at the debt crisis. regulatory reform and anything else that we can throw at him. first though let's take a look
welcome back. i'm here with universal vice president jack donaghey. thanks for sitting in the hot box. >> my pleasure. >> also his tie tells us he works for a think tank. >> and the food in his beard tells us he purchased a snack pack on the way from new haven. >> that's got to hurt, walter. >> got to love it. >> great. thanks for your thoughts on our interview with senator greg. you guys are divided. some think i was a jerk. some think a total jerk. i was just doing my job. >> i think you had the right point. >> let's turn to nouriel on the second half weakness which you said weakness but are you thinking double dip possibility? >> i think essentially we'll have the fiscal stimulus gone and then there isn't much growth of private demand and you have gridlock in congress, sovereign risk rising. if you exit too soon you have
inflation, recession, too soon you have higher rates. you have issues with china now and i say a lot of uncertainty, policy, politics, reagan la tri reform, and the economic recovery in the u.s. and stalling of growth in europe and japan. >> what is the percent chance of a double dip? >> i would say a 60% probability -- i would say 20, 25% of a double digit not this year, next year. some of this is probably going to come up next year. >> you were here for most of the week. >> yes. >> we did corker yesterday, gregg today. i know you follow regulatory reform. given the discussion with gregg what is the chance you think they actually come up with a bipartisan bill? >> as close as zero. >> really. >> i thought it was very negative unless you believe we'll have a bill that is as i said watered down. judd said that's a "new york ti w